The Invesco QQQ Trust (QQQ) and the Vanguard Growth Index Fund ETF Shares (VUG) are both among the Top 100 ETFs. QQQ is a Invesco Large Growth fund and VUG is a Vanguard Large Growth fund. So, what’s the difference between QQQ and VUG? And which fund is better?
The expense ratio of QQQ is 0.16 percentage points higher than VUG’s (0.2% vs. 0.04%). QQQ also has a higher exposure to the technology sector and a higher standard deviation. Overall, QQQ has provided higher returns than VUG over the past ten years.
In this article, we’ll compare QQQ vs. VUG. We’ll look at holdings and risk metrics, as well as at their annual returns and industry exposure. Moreover, I’ll also discuss QQQ’s and VUG’s performance, fund composition, and portfolio growth and examine how these affect their overall returns.
|Name||Invesco QQQ Trust||Vanguard Growth Index Fund ETF Shares|
|Category||Large Growth||Large Growth|
The Invesco QQQ Trust (QQQ) is a Large Growth fund that is issued by Invesco. It currently has 174.51B total assets under management and has yielded an average annual return of 21.27% over the past 10 years. The fund has a dividend yield of 0.49% with an expense ratio of 0.2%.
The Vanguard Growth Index Fund ETF Shares (VUG) is a Large Growth fund that is issued by Vanguard. It currently has 165.53B total assets under management and has yielded an average annual return of 17.58% over the past 10 years. The fund has a dividend yield of 0.57% with an expense ratio of 0.04%.
QQQ’s dividend yield is 0.08% lower than that of VUG (0.49% vs. 0.57%). Also, QQQ yielded on average 3.69% more per year over the past decade (21.27% vs. 17.58%). The expense ratio of QQQ is 0.16 percentage points higher than VUG’s (0.2% vs. 0.04%).
The Invesco QQQ Trust (QQQ) has the most exposure to the Technology sector at 45.46%. This is followed by Communication Services and Consumer Cyclical at 19.55% and 17.27% respectively. Real Estate (0.0%), Energy (0.0%), and Utilities (0.89%) only make up 0.89% of the fund’s total assets.
QQQ’s mid-section with moderate exposure is comprised of Financial Services, Industrials, Consumer Defensive, Healthcare, and Consumer Cyclical stocks at 2.51%, 2.61%, 4.68%, 7.04%, and 17.27%.
The Vanguard Growth Index Fund ETF Shares (VUG) has the most exposure to the Technology sector at 39.05%. This is followed by Consumer Cyclical and Communication Services at 17.78% and 16.49% respectively. Energy (0.32%), Basic Materials (1.52%), and Consumer Defensive (2.41%) only make up 4.25% of the fund’s total assets.
VUG’s mid-section with moderate exposure is comprised of Real Estate, Industrials, Financial Services, Healthcare, and Communication Services stocks at 2.46%, 5.13%, 6.75%, 8.09%, and 16.49%.
QQQ is 6.41% more exposed to the Technology sector than VUG (45.46% vs 39.05%). QQQ’s exposure to Communication Services and Consumer Cyclical stocks is 3.06% higher and 0.51% lower respectively (19.55% vs. 16.49% and 17.27% vs. 17.78%). In total, Real Estate, Energy, and Utilities also make up 1.89% less of the fund’s holdings compared to VUG (0.89% vs. 2.78%).
|Facebook Inc Class A||4.01%|
|Facebook Inc A||4.01%|
|Alphabet Inc Class C||3.9%|
|Alphabet Inc Class A||3.53%|
|Alphabet Inc A||3.53%|
QQQ’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Facebook Inc A at 11.0%, 9.82%, 8.35%, 4.01%, and 4.01%.
Alphabet Inc Class C (3.9%), Tesla Inc (3.9%), and NVIDIA Corp (3.65%) have a slightly smaller but still significant weight. Alphabet Inc Class A and Alphabet Inc A are also represented in the QQQ’s holdings at 3.53% and 3.53%.
|Facebook Inc Class A||3.89%|
|Alphabet Inc Class A||3.43%|
|Alphabet Inc Class C||3.22%|
|Visa Inc Class A||1.78%|
|PayPal Holdings Inc||1.6%|
VUG’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 10.13%, 9.52%, 6.88%, 3.89%, and 3.43%.
Alphabet Inc Class C (3.22%), Tesla Inc (2.44%), and NVIDIA Corp (2.21%) have a slightly smaller but still significant weight. Visa Inc Class A and PayPal Holdings Inc are also represented in the VUG’s holdings at 1.78% and 1.6%.
QQQ had its best year in 2020 with an annual return of 48.6%. QQQ’s worst year over the past decade yielded -0.14% and occurred in 2018. In most years the Invesco QQQ Trust provided moderate returns such as in 2012, 2014, and 2010 where annual returns amounted to 18.09%, 19.12%, and 19.89% respectively.
The year 2020 was the strongest year for VUG, returning 40.16% on an annual basis. The poorest year for VUG in the last ten years was 2018, with a yield of -3.32%. Most years the Vanguard Growth Index Fund ETF Shares has given investors modest returns, such as in 2014, 2012, and 2010, when gains were 13.62%, 17.03%, and 17.11% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in QQQ would have resulted in a final balance of $76,522. This is a profit of $66,522 over 11 years and amounts to a compound annual growth rate (CAGR) of 21.27%.
With a $10,000 investment in VUG, the end total would have been $54,735. This equates to a $44,735 profit over 11 years and a compound annual growth rate (CAGR) of 17.58%.
QQQ’s CAGR is 3.69 percentage points higher than that of VUG and as a result, would have yielded $21,787 more on a $10,000 investment. Thus, QQQ outperformed VUG by 3.69% annually.
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